R. 451.1.2 - Broker-dealer definition exclusion

R. 451.1.2. Broker-dealer definition exclusion

Rule 1.2. As used in these rules and in the act, if applicable, "broker-dealer" does not include any of the following:

(a) A "finder" as that term is defined by section 102(i) of the act, MCL 451.2102(i).

(b) A person whose participation in an offer or sale of securities, for direct or indirect compensation, is limited to introducing 1 or more accredited investors, as that term is defined in SEC rule 501, 17 C.F.R. ยง 230.501, who are residents of this state to an issuer incorporated or organized in this state, or introduces an issuer incorporated or organized in this state to 1 or more accredited investors who are residents of this state, solely for the purpose of a potential offer or sale of the issuers securities in an issuer transaction in this state, and who complies with all of the following:

(i) The person shall not engage in any of the following activities:

(A) Provide introductions to an issuer for a transaction or a series of related transactions in connection with the offer or sale of the issuers securities that exceeds a purchase price of $15,000,000.00 in the aggregate.

(B) Participate in negotiating any of the terms of the offer or sale of the securities.

(C) Advise any party to the transaction regarding the value of the securities or the advisability of investing in, purchasing, or selling the securities.

(D) Participate in the preparation, delivery, or execution of the issuers disclosure documents, offering circulars, contracts, or other documents related to the transaction except as provided for in subrule (b)(iii) of this rule.

(E) Conduct any due diligence on behalf of an issuer or on behalf of a potential purchaser of an issuers securities.

(F) Sell or offer to sell in connection with the issuer transaction any securities of the issuer that are owned, directly or indirectly, by the person.

(G) Receive, directly or indirectly, possession or custody of any funds or securities in connection with an issuer transaction for which the person is engaged.

(H) Receive compensation in connection with any introduction that results in the offer or sale of securities without reasonable grounds to believe the offer or sale complies with section 301 of the act, MCL 451.2301.

(I) Receive transaction-based compensation.

(ii) The person and the issuer shall enter into a written agreement before any introduction facilitated by the person in connection with the potential offer or sale of the issuers securities. The agreement must include the following:

(A) The type and amount of compensation that has been or will be paid to the person in connection with the introduction and the conditions for payments of that compensation.

(B) That the person is not providing advice to the issuer or any person introduced by the person to the issuer as to the value of the securities or the advisability of investing in, purchasing, or selling the securities.

(C) Whether the person, a related person, or a member of the persons immediate family, has any beneficial interest in the securities being offered or sold by the issuer.

(D) Any actual or potential conflict of interest in connection with the persons participation in the potential securities transaction.

(iii) The person shall provide a copy of the written agreement required by subdivision (b)(ii) of this rule to any potential purchaser of securities before making any introductions in reliance on this rule, and receive written acknowledgement from the potential purchaser of delivery of the written agreement.

(iv) Copies of all written agreements and acknowledgements required by subdivision (b)(ii) and (iii) of this rule entered into by the person must be maintained by the person for a period of 5 years from the date the agreement or acknowledgement is signed by all parties, and must be provided to the administrator upon the administrators request.

(2019 MR 1, Eff. July 3, 2019)

The following state regulations pages link to this page.